When reading anything about economics or finance, you will most likely encounter two terms: business and industry. It is hard to imagine a world without the various business and industrial sectors. After all, they drive the economic engines of most countries worldwide. While business and industry may sound similar, they are different. And there is more to these terms than you think. So, you must grasp the basics before diving deeper into these topics.

Business and industry – Understanding the concepts
A business generally refers to an organization that buys and sells goods and services. It can be a for-profit entity that seeks to provide a product or service with the expectation of earning a profit or a non-profit organization that offers a service of benefit to the community with no intention of making money.

An industry is a group of organizations related to each other based on the main business activities they perform. In other words, when grouped together, similar businesses make an industry, for example, the agriculture and fashion industries.

The primary difference between a business and an industry is that the latter is a broader term that includes multiple businesses, while the former can operate in any industry.

What are the main types of businesses?
Businesses can be of different types, depending on how they function. The most common forms are:

Sole proprietorship
A sole proprietorship is the most basic form of business. It refers to a business owned and operated by a single person. There is no legal distinction between an individual’s assets and liabilities and their business assets and liabilities. This means tax and legal liabilities of the business are the owner’s responsibility, and every profit earned goes to the owner’s pocket. Sole proprietorship gives the owner total control over the business.

Partnerships
Partnerships are businesses owned by more than one person. Each partner invests resources, money, labor, or skills into the entity and shares the profits earned. Partnerships are mainly of two types: general and limited. General partnerships do not require a formal agreement between the partners and can be verbal. Limited partnerships require a formal agreement, including a certificate of partnership with the state.

Corporations
One of the most complex business structures, a corporation refers to a business in which a group of people is a single entity. Corporations are owned by shareholders, or stockholders, who elect a board of directors responsible for managing the corporation. Establishing a corporation requires paperwork and is costly. But an advantage is that personal assets cannot be seized to pay for business debts.

Limited liability companies (LLCs)
An LLC lets business owners keep some advantages of partnerships while limiting their legal and financial liabilities. LLCs are pass-through entities, meaning they are not subject to corporate income tax. The profits go directly to the owner and are taxed under individual income tax. LLCs make it easier for entrepreneurs to start a small business.

What are the main types of industries?
Industries are classified into three main categories:

Primary industry
Primary industries find natural resources or raw materials from the earth, gather them, and store them. A popular example is the mining industry, which requires businesses to send specially trained workers to places where desired minerals are found, extract those minerals, and transport them to a facility where they can be used. Other examples include agriculture, fishing, oil refining, metal smelting, and stone crushing. Primary industries are typically at the heart of the economy in developing countries and make up a relatively smaller percentage in developed countries.

Secondary industry
Secondary industries take the raw materials and natural resources collected by primary industries and turn them into a wide range of products that the population can use. They use both machine and human power to manufacture products, package them, and distribute them to retailers and other locations. The secondary sector is further subdivided into heavy industry and light industry. Heavy industries involve large capital inputs and bulky items, consisting of construction, transportation, shipbuilding, and other businesses. On the other hand, light industries are less capital demanding and require a relatively smaller quantity of raw materials, such as food, beverages, and clothing.

Tertiary industry
The products manufactured by the secondary go into the hands of the tertiary industry, whose job is to make the products available to the people. This tertiary sector comprises commerce and service industries and is typically not involved in creating products. A wide variety of businesses and services are included in the tertiary sector. These include finance, wholesale, retail, real estate, legal, hotels, tourism, restaurant, repair and maintenance services, police, entertainment, information technology, health, and more.